Now that I have closed on the house and my family have moved into the new house for more than one month, I finally found sometime to continue the story on how I got my mortgage approved by Provident Funding.
Interested reader can read my earlier blogs on this matter here:
Yes, it was Provident Funding who was giving me all the hard time. As I have closed on my house, I am not afraid to bad mouth them a bit.
I have had a mortgage with this lender for my previous house since 2004. For the past 10 years, I never missed a mortgage payment to them, but this time around, they acted as if they never knew me. It is not that the mortgage service side of the business and the mortgage originating side of the business never talk. On the contrary, they do. My mortgage broker told me he actually talked to the same people when he tried to contact them on the service side of the business.
It is just that the mortgage underwriting business has become so stringent since financial crisis of 2008-2009.
It is all about debt-to-income ratio. It is all just business.
After Provident Funding arbitrarily assigned an annual income of $56,000 for me, reducing the debt level becomes crucial. My debt-to-income ratio came a bit above their underwriting guideline.
A couple of things worked against me to that front. Here are two of them that played a role in the story:
- I had a monthly car lease payment of about $600
- I had not sold my original house yet before I closed on the new house. Mortgage payment: about $,1300
So first a lower rank loan officer suggested me to pay off the leasehold. I was about one-third into my three-year car lease. Paying off the lease early is to accelerate the next 20 or so payment to today. Effectively the loan officer was asking me to pay for the interest but forsake the benefit of holding onto the money. Not very smart financially, not I was promised that if I did that, I would get my loan.
Well, it did not solve the problem. A couple of days later, a senior loan office reviewed my case and ruled that even I paid off the leasehold, I still do not own the car outright. In the end, I still owed money on the car, so paying off the lease did not help.
That left me with little choice but to pay off the mortgage on the original house. A reduction of $1,300 in monthly payment goes a long way to bring down the debt-to-income ratio.